The Australian Small Business Blog

Wednesday, September 12, 2018

Benchmarking Franchisee Performance: Comparing Apples and Oranges

by Dr Greg Chapman

Even though comparing the performance of your franchisees can be a minefield, it is still best practice to do so. How else do you know which franchisees are leading the way, and which need further support? What better way to discover the new ideas that have proved to work and should be spread across the whole franchise?

However, comparisons between franchisees can be like comparing apples with oranges.

The minefield arises when trying to find a way to make objective comparisons. Simplistic comparisons on turnover can give quite a false picture of performance. A prime variable is the traffic in the location. Franchises in high traffic locations should have higher sales, and usually do, but they still could be performing below expectations. Other areas of sensitivity are income levels of the area and the age of the residents.

In order to objectively understand the performance of your franchisees, it’s necessary to correct for such factors as well as any others relevant to your marketplace. No model that corrects for these factors will be perfect, but after allowing for random variations, trends do emerge.
Such analysis won’t answer all your questions, but it will allow you to start to pinpoint which franchisees are truly performing and which aren’t, especially when combined with system compliance audits.

For example, a franchisee in a lower traffic location may actually be performing above expectation because they are complying with the systems, but may have developed additional strategies to compensate for the lower traffic. On the other hand a franchisee in a high traffic location may just be coasting and missing opportunities.

True over performance and under performance will remain hidden unless corrections for factors outside franchisees’ control are made. In fact, the real danger is the good performers are admonished and the underperformers escape notice which can damage the franchisor/franchisee relationship to the detriment to the whole franchise.

A good franchisor will:
• Provide comprehensive and tested operating systems
• Listen to their best franchisees on how they can improve their system
• Support franchisees in trailing new concepts in a controlled way
• Provide regular systems training
• Monitor system compliance

However to achieve the maximum potential for the franchise, there must be an objective measurement and reporting system that allows you to compare apples with oranges.

May Your Business this Year be - As You Plan It.

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Dr Greg Chapman is the Director of Empower Business Solutions and is Australia's Lea ding Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.

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